Brexit blamed for dramatic fall in UK business registrations

Many employees are returning to the EU permanently, leaving UK companies struggling to recruit suitably skilled staff. Photograph: Virginia Mayo/AP

Britain’s decision to leave the European Union has sparked a dramatic fall in the number of French, Dutch and Belgian businesses registering in the UK, in a further illustration of Brexit’s impact on the UK economy.

Figures from Companies House show that French companies registered 48% fewer businesses in the UK in 2016-17 than the previous financial year while companies in Belgium registered 38% fewer. Companies in the Netherlands, which is probably the worst affected by Brexit of Britain’s trading partners, registered 52% fewer companies last year than in 2015-16.

The collapse in company registrations mirrors the reluctance of foreign companies to invest in the UK either by building new factories or buying UK businesses. OECD figures show that foreign direct investment into the UK tumbled in 2017 by 90% following a bumper year in 2016.

Business lobby groups have blamed the downturn on the uncertainty surrounding the Brexit talks. Several business leaders and thinktanks have criticised Theresa May’s failure to secure more detailed agreement inside her own party on the preferred trading relationship with the EU before triggering Article 50 last spring.

EEF, the manufacturers’ organisation, warned that Brexit was also having an impact on job applications which has dropped by 17% since last year.

In addition, the business lobby group said a further 13% of manufacturers reported an increase in EU workers leaving their firms. Many of those employees were returning to the EU permanently, it added, leaving companies struggling to recruit suitably skilled staff in the UK.

The EEF report, Navigating Brexit: The Migration Minefield, calls on ministers to move swiftly to give companies and their EU workers greater certainty over their future status to stem the flow back across the channel.

Tim Thomas, the director of skills and employment Policy at EEF, said: “Skills shortages are endemic in manufacturing and engineering, and companies are becoming increasingly concerned about their ability to access the skills they need post-Brexit.

“While the slump in job applications from the EU has slowed, there is still much to be done to make sure UK businesses are still able to attract the very best talent from Europe.”

Proper guidance for EU workers seeking settled status would do much to mitigate this problem, according to the report. Four in 10 (39%) of manufacturers need help in understanding the ways to support EU employees to gain residency/settled status and 68% want guidance on what the changes after March 2019 will mean for employers and their EU employees.

The fall in the number of EU firms registering companies in Britain was limited to 5% overall following a rush of application from the tax-friendly jurisdictions of Luxembourg and Cyprus.

Businesses in Luxembourg registered 71% additional companies while firms in Cyprus doubled their registrations.

Lynne Hardwick, the head of marketing at Evolution Money, which compiled the report, said: “The decrease in EU company registrations sets a worrying precedent, suggesting that overseas organisations may not see the UK economy as a safe place to do business. We can only hope this trend reverses as these businesses are a vital part of our infrastructure.”